Generali Catches Up in Third Quarter With Good Results From Spread-Based Business

Generali has reported a good set of results for the first nine months of the year, making good headway in the third quarter. While the business’ expansion in the top line is relatively muted, only growing gross written premiums by 1.3%, the movement to profit is excellent as new business margin on the present value of new business has improved by 68 basis points and the combined ratio remains typically strong and at a muted deterioration of 2 percentage points over the same period last year. We think the good performance so far this year has predominantly been driven by a better spread within the life and health business. Most of Generali’s life liabilities carry guaranteed interest. A double-digit rise in property and casualty gross written premiums has driven a 2.9% rise in the operating result of that division. The detractor has been the operating result from Banca Generali with performance fees from lower market values. Net profit delivered is EUR 2,223 million, taking the business slightly ahead of our EUR 2,825 million full-year estimate. We maintain our EUR 20 fair value estimate and no moat rating.